The Reality of Investing in 2026

0:05Travis Hoium:Oil is up, the market's down, so where do we go from here? Motley Fool Money starts now.

0:25Everybody needs money. That's why they call it money.

0:30Travis Hoium:The best things in life are free, but you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Travis Hoyam, joined today by Lou Whiteman and John Quast. And guys, we've got to talk about the elephant in the room. That's what's going on in Iran. It's causing a huge increase in oil prices. It's causing the market to decline. This could impact the economy for years to come. So we're going to try to pull this apart as much as we can, bring a little bit of historical context to what we're seeing in the market, how investors should be thinking about this.

1:05Travis Hoium:But let's start with the near-term impact, because I think that's probably the easiest, Lou, to get our heads around. As we look at, in particular, energy, about 20 % of the world's oil flows through the Strait of Hormuz. That's getting a lot of the attention in the market. Qatar's LNG assets have been hit. They say that that could take years to actually bring back online. When you look at over the next one to three months, let's say, what are you looking at in energy markets, in the impact of the market, in the market overall, in the economy? Where is your head going to sort of try to process this?

1:42Lou Whiteman:Yeah. Where does your head go, right? It's a great question. The hard thing about this is that there are two independent timelines. And the second timeline is the one that's really scary. Destruction is immediate. Rebuilding takes time. So the work of one second's explosion can take, if we're lucky, months. So we have both the timeline of the immediate, when will this conflict end, and the timeline of the looking forward, when are we back to normal? Those are separate things. We can't just say, all right, if the conflict ends next week, we're back to normal next week. In the case of the LNG assets, what did they say?

2:21Lou Whiteman:Three to five years before we're back to normal. And that assumes no more destruction, which I don't know if we can assume that. The longer we're in the destruction phase, the more that timeline exponentially goes out on the rebuilding phase. I don't think we can look in terms of months here. I think we are already at a point where we are looking as a matter of years before things are back to normal. And that's really depressing. I don't think I have to say that, but that really creates challenges for the global economy.

2:55Travis Hoium:John it seems like there's some band-aids that we can put on this talked about you know releasing some of the oil in the U.S. oil reserve in the past you would see a country like Saudi Arabia say you know what we'll step up we'll we'll provide a little bit more oil it seems like there's a little less slack there for them to be able to do that so how do you how do you think about that supply chain because that's that's where things we learned during COVID things get really complicated really quickly yes supply chain does get really complicated very quickly I heard one person talk about this like this.

3:28There could be a supply issue, and that's kind of an easy thing. But we're actually dealing with a supply chain issue, and that's where it gets a whole lot more complicated very quickly. I mean, take OPEC, for example. It regularly changes the supply of oil on the market. It goes both up and down in how much oil it's producing and shipping out. That's a supply issue. But right now we're talking about the LNG facility in Qatar. That's a supply chain issue that takes forever. And like you mentioned, we're talking about some potential ways to mitigate this, but it's pretty difficult. You look at the oil reserves.

4:08We've talked about that on a previous show. It really doesn't do a whole lot for prices because of how small that is in relation to daily consumption. The Trump administration right now is talking about waiving the Jones Act, or maybe it officially did waive the Jones Act for 60 days. This is something that is hoped to mitigate oil prices because it basically loosens restrictions on U.S. ports, but some are already doing some estimations here, and maybe it's going to save less than a penny per gallon on gas at the pump. I mean, it's really not a material development at all. There's not a whole lot we can do here other than what Lou said, rebuild the supply chain, but that's going to take time and we can't get started yet until this current phase is over.

5:00Lou Whiteman:Another complicating factor here and another kind of glossary word we have to add is the crack spread. And the crack spread is basically the difference between the price of oil and the price of what we make with oil. It's very oversimplified.

5:13Travis Hoium:Gasoline is typically what you

5:16Lou Whiteman:would. Oh, yeah, yeah. All of that. Oil has been relatively calm relative to refined products. And that's because there's a disconnect between where the crude is and where the refineries are and what refineries are where. Technically, there is a global surplus of crude, even with what's going on. If you look at the embargoed crude, the ability of outside of Straits of Hormuz to produce, but there isn't the capacity to refine. And at the same time, a lot of those products are, you know, demand is inelastic because we have to drive to work. But more importantly, the military is using a lot of jet fuel and a lot of diesel right now.

5:56Lou Whiteman:The bigger issues right now, and this is how it reverberates the economy, we could go beyond that. A fertilizer has already come up and fertilizer. We are lucky here because the North American fertilizer season is basically, it had already been booked. It's already through the street. We have time there, but that implies that this is going to ripple through for years and not just one growing season because next season's fertilizer is stuck. How about chip manufacturing? Even semiconductors, guys. Helium and sulfuric acid, two very, very important parts of the chip making process. 20 to 30 % or more production comes through the Gulf.

6:40Lou Whiteman:I don't think any of us really have our heads around just kind of the disruptions that have already occurred. And again, I hate to be like, you know, such a doomsday person, give them back to this, but all of this is assuming that it just all ends today. How long would it take to rebuild? I haven't checked in the last 10 minutes, But I have seen no sign that it is ending today. And again, for every one day the conflict continues, these issues are going to be extended by days, weeks, months, not just a day.

7:11Travis Hoium:Let's bring a little bit of historical context into this. And I want to wrap the economy in as well. You guys have touched on a little bit of that and where we could see some impacts. But, you know, gasoline is something that people are buying on a day-to-day basis. And like Lou said, it's an inelastic demand. If I need to go to work, I need to go to work whether gas is$2 a gallon or$4 a gallon. The two historical times that I thought of comparing this moment potentially to is the 1973 oil crisis. Also, Iran involved in that one. And then also the war in Iraq started in 2003. You had 9-11, 2001.

7:50Travis Hoium:The period after that for the market was essentially a decade of the market going absolutely nowhere. So there was an economic impact. And then you potentially had a market impact where investors start to go, man, look, think about all the growth stocks that we have today. Maybe we shouldn't be valuing these as highly if we've got a whole lot of uncertainty. So now you see multiples start to come down. Is that something that we should be thinking about, Lou? And I don't, you know, we don't want to be doomerism here, but these are the concepts that we need to think about. Because if this is another 1973, if this is another 2003, it could mean that that's going to affect our investments over the next decade.

8:36Lou Whiteman:So I would say the oil experts say that we are already past what definitely the Iraq war was. And I think if you look, a lot of the production in the supply impact, is that what you mean? Yeah. I mean, production capacity was largely spared there. So, we didn't have, I mean, we had local infrastructure issues. I don't want to be dismissive of it, but, you know, this is far worse. I don't remember the 73 oil embargo as well as I remember. Yeah, I'm happy to say I'm not that old. But yeah, look, there is no way that this won't have a profound economic impact. I don't think that can be debated. the debate and the unknown, because there really isn't a debate.

9:17Lou Whiteman:We just don't know how severe the impact is going to be. And yeah, as investors, I think we need to prepare ourselves for that because hopefully I'm wrong. Hopefully there will just be a bounce back. But if there isn't, and we can get into this later, I think, it's going to be, it's time to buckle up.

9:39Travis Hoium:Yeah, John, we've already seen the market start to be impacted. The S &P 500, uh, as we're recording year to date down about 4%, the NASDAQ composites down about 6%. We're definitely not in any sort of, you know, major correction territory, but the fear and greed index is, is now in full on fear mode. So should we be sort of a little bit more fearful in the way that we're thinking about expectations for the future? Yeah, it's so interesting. Right now, the fear and greed meter tracking this investor sentiment, sitting at 17, that's its lowest this year and hitting pretty close to the lowest point, highest fear in several years.

10:22What's so interesting is that a market crash and a situation like this can generate months and months of bad news. It really can. It can drive sentiment lower. And one of the interesting things is so many investors haven't experienced a real economic crisis. Yes, there have been pullbacks here and there. But it's a little bit dated now. But in 2021, Charles Schwab did a study and found that 15 % of investors started investing during the pandemic. we're five years later now. That means that there's a significant percentage of investors that have started investing within the last six years. They've never experienced a 2000 event.

11:01They've never experienced a 2008 event. And they're already very fearful with the market only, you know, it's only like five or 6 % off of its all time high right now. That's pretty good. It can get a lot worse. It can drive that sentiment a lot lower. I hope that people listening to this show, don't start panicking because that's one of the worst things that you can do. Your emotions are a very bad instructor and guide for your financial life, right? It's important to have a level head, but it's also important to realize, yeah, this can get worse before it gets better. Yeah.

11:33Travis Hoium:Just to do some quick math on that, the market bottomed in March of 2009. So if you started investing and you were 23 in 2009, you would be 40 now. There is just a huge number of investors. A lot of people that I talk to on a day-to-day basis were not investing back then, much less have stories like JDS Uniphase, for those of us who can go back all the way back to the 1990s. Yeah, it can get worse. Let's talk about, when we come back, where we're looking at potential opportunities, because I do think that we need to remind people that this does not mean panic sell everything, but it means that this is why we continue to add to the market.

12:14Travis Hoium:Buy when you're lower, you want to be greedy when others are fearful. So how should we be thinking about that as investors? We'll get to that in a moment. You're listening to Motley Fool Money.

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12:51Travis Hoium:Welcome back to Motley Fool Money. One of the things that people often talk about when the market starts to decline or we have uncertainty like this, John, is safe havens. we you know we think about these as like maybe the big companies uh where we know we're going to be buying toilet paper in the future or food in the future but a lot of these companies are really expensive we also have things like gold bitcoin are there any real safe havens today well no in a worst case scenario with the economy and with the stock market then really no when it comes to that what we're talking about here with let's just say oil prices stay high for longer.

13:27There's an obvious first order impact, right? And that's on discretionary spending. If you're spending more on gas to get to work, for example, you have less disposable income on toys. So your discretionary spending is an obvious first order impact. There's lesser obvious second order impacts. Lou already touched on potential helium disruption and how that can impact semiconductors potentially. There's also things such as aluminum. Aluminum is a very energy intensive metal, right? And so maybe even your beverage companies are having a higher input cost with aluminum cans. I mean, there's some interesting things there, but what I like to do in times like this is I have a watch list of high quality companies.

14:09Okay. Not necessarily safe havens as in, they're never going to go down a percentage point, but they're very high quality businesses that I would turn to when I, when it's hard to see through these cloudy skies. Right. And so I'm thinking about companies such as Waste Management, for example, ticker WM, or even a Costco. I'd even put Tractor Supply in here as well. Tractor Supply provides a lot of livestock and pet food. And so it really tends to be more resilient. Vistra Energy would be another one. So these are things that regardless of what market conditions are, and it can get chaotic, I like to have a watch list of these kinds of companies that I can really say, you know what, in 10 years, I really expect them to be bigger and better than they are right now, no matter what happens right now.

14:57Lou Whiteman:Yeah. I mean, in a real downturn, and look, we're not there yet, but if it comes in a real downturn, there is nowhere to hide, period. I wish there was some secret code. There are some sectors that tend to hold up better than others. But in a downturn, everything goes down and the pain is almost unavoidable. Most important advice here is don't make long-term decisions based on near-term pain. Fleeing the markets when things are bad can be really, really harmful to your long-term goals. If an individual business is permanently damaged from this, and it could happen in some sectors, then yes, maybe you need to look at selling.

15:36Lou Whiteman:But focus on the long-term, no matter how bad things get. I believe the economy will eventually recover. I believe that this, you know, 200-year-old chart of the markets going up, that long-term trend will continue. Ask yourself if the companies you are considering selling will be there on the other side. If they are, try to ride out the storm. You know, in terms of specifically where to go, I mean, I'll note, Travis, I almost made my radar stock because, you know, six-month treasury, there's 10 basis points higher than a week ago. So, that's something, I guess, but that's cash. I think, I'll just be contrarian to John.

16:16Lou Whiteman:If you buy the premise that everything goes down, and if you believe that the economy will eventually recover, and I do believe that there are really great companies out there that can survive, I actually like to look for opportunities in the non-consumer staple area. these, I don't know if it's high flying mag seven stocks to come back to earth, but it's really hard to do. And, you know, I mean, I, again, I think doing nothing is good enough, but I am much more intrigued in a real, real downturn. You know, God forbid a repeat of 2008, 2009. These are the times that I like to stick my neck out and try and pick those previous high flyers that I think in better times can do it again.

17:04Lou Whiteman:The staples are there. And to me, I would argue that things like energy and staples, you keep in your portfolio four times like this and you don't buy them now. But look, in general, I think you look cautiously for long-term opportunities. And again, focus on what a business can be after the damage is done and try not to dwell on what it is now.

17:29Travis Hoium:I'll just add one of the things that I'm looking at is companies that have really phenomenal balance sheets and don't burn cash. I think that's one of the challenges. A lot of companies that get a lot of attention have a ton of cash on the balance sheet, but then you look and you go, they've really only got the runway to make it through the next two or three years. So if things are really bad, they're going to have to go raise capital again. But if you have 20%, 30 % of your market cap in cash, and there are stocks that I have in my portfolio that are in that position, and you have a cash generating business, you can start to do things like, well, use it as a safety blanket, but you can also start to use that cash as a weapon to buy back stock and say, you know what, market, you're completely wrong.

18:09Travis Hoium:And we're going to be the ones that are aggressive when everybody's in fear mode. John, I just want to quickly ask how you think about cash in this moment. Is that something that you are either moving to? Or do you just have it available? If you're, you know, we do have a downturn, you want to be opportunistic? Yeah. I mean, it's so important to stay invested, right? I mean, everyone would love to sell the top and buy the bottom. Research shows that you can't do that. I can't do that. To channel my inner Mark Twain, I've anticipated many market crashes that have never happened. So it's important to stay invested.

18:41But I do have a cash position right now. I'm about 20 % cash right now. It's arbitrary, imperfect. That's my max. So the other 80 % is going to stay in, but that cash precision does help me hold tight with my stocks right now before things get chaotic. It helps me be able to realize that in a downturn, I'm ready to go. I can take advantage of some opportunities when it knocks.

19:04Travis Hoium:Yeah, I think all of these things. And the other thing I'm doing is I'm adding to my portfolio every single month. So dollar cost average, whether you're at the highs or the lows, it helps me sleep at night as well, knowing that I'm going to be buying every month. When we come back, we are going to have John and Lou pick their Final Four. You're listening to Motley Fool Money.

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20:32Travis Hoium:Welcome back to Motley Fool Money. March Madness has begun, so we thought we'd take our opportunity to turn that into a little bit of an investing game. I want to give Lou and John 12 stocks, and I want them to pick a final four, and then ultimately the champion of these 12 stocks. We're going to go with companies that are well-known or bigger in the market. We have the full Mag 7, so Alphabet, NVIDIA, Apple, Tesla, Microsoft, Meta, and Amazon. Then we've added Palantir Micron, one of the hottest stocks in the market today. Disney, got to have something consumer. It's a little bit of a recovery play.

21:07Travis Hoium:Chipotle and Rocket Lab. John, I'm going to have you go first. Out of those 12 stocks, who is going to make your final four? Yeah, my final four here was actually kind of easy for me. I'm going to go with Amazon, Meta, Micron, and Rocket Lab. What are you thinking there with a lot of technology and big companies? Amazon, obviously one of the biggest companies in the world. I think that has one of the lowest price earnings multiple in the mag seven. Are you just seeing value in all those areas right now? Yes. I mean, with Amazon, as you point out, it has pulled back. The valuation looks good. And that cloud business, it just continues to perform so well.

21:52I like Amazon for that reason. Meta platforms, as we're going to talk about it in a moment, I think, but you know, as much money as it has wasted at times over the last several years, this company is still just oozing cash. It is being very shareholder friendly. And that's with all of the things that it's wasting money on. I think that it's hard for meta platforms to lose, quite honestly. You look at Micron, I think that the current trends in computer memory, I don't think that they're as it's late in the cycle. I really think that this still has multiple years, at least to it. I think that Micron can make unprecedented money over the next several years.